Tips to manage Your Personal Finance as an entrepreneur

Managing your personal finance as a new entrepreneur can be really tricky. Most of the time you will have a hard time clearly distinguishing between your company’s money and your personal money. If you are a new entrepreneur and you own 100 percent shares in the company, how do you manage your personal finance? How do you separate your personal money and business money?

Here are some key considerations to manage your personal finance and business as a new entrepreneur.

Paying For Your Products

Let’s say you manufacture products, can you use your product for free for personal needs or do you have to pay money? The answer is simple, you need to treat your business like a business, so you need to pay for your own products. Running a business is not something like running a family. Since you are using company’s money, you also need to pay for the products you use. Likewise, you also need to avoid giving free products to your friends and family. Instead give free products to your potential customers for a chance to increase sales.

Giving Yourself a Salary

There is one common question among new entrepreneurs, do you need to give yourself a salary? The answer is you need to give yourself a salary from day one. Don’t ever think about working for free even if it's your company. You work, so you should get paid, that’s the law. However, avoid paying yourself a huge salary. Don’t give yourself what you deserve, instead give a salary that your business can afford. When you give yourself a salary, you can also pay your expenses through your own money and avoid using company’s money.

Emergency Funds

You need an emergency fund in your personal life, likewise your business also need an emergency fund. When your business has an emergency fund, you will be using your business fund during emergencies like paying debt or bailing out your business from debt. This will save you from using your personal funds to pay your business debt. When your business can handle its own expenses and debt, you will be saved from using your personal fund.

Reinvesting

Reinvesting is very important to grow your business. As a business owner, you might be confused on whether you should invest your personal money or not. Well, a simple solution to this question is you reinvest your business profits, or revenue. Avoid taking your business profit home and reinvest your profits. This is the best way for your business to compound profits. Well, you can of course take your business profits but try to avoid withdrawing profits early on. If you do your business will not scale. Well, you can also reinvest your personal fund, but when you do that you need to revaluate your business capital and also have more shares in your company.

Managing Business Expenses

Distinguish between business expenses and personal expenses. If you have to take a trip to another city for a business deal, that’s business expenses. However, if you invite your staff to your kid’s birthday party, even when you are organizing the party at your office, is a personal expenses.

Conclusion

You need to track your income and expenses. You need to keep a record of every penny that comes into your pocket and every penny that goes out of your pocket. The process of keeping track of your income and expenses is referred to as cash flow management. Cash flow management skills are very essential to improve your finances. When you have cash flow management skills, you will properly understand your financial condition and modify your life accordingly. let's say you earn $1000, can you pay $ 800 on rent? If your income is $1000 can you maintain a lifestyle that requires at least $1500? When you know how much money you are making, you can modify your life accordingly. The easiest way to keep the track of your income and expenses and ensure that you are not going off the limit is by creating a monthly budget and staying within your budget. When you are able to track your income and expenses, you can start saving money.